The recession-fuelled rise in postsecondary enrolment has maxed out the federal student loan program at $15-billion, forcing Ottawa to hastily change the rules to keep the money flowing as classes resume for the fall.

Without the last-minute boost for the cap on total student debt, the federal government estimated, 50,000 students would have been denied about $300-million worth of loans.

The jump in student indebtedness that caught the loan program's administrators by surprise is thought to be a facet of the recession, which pushed many to return to - or remain in - school even as it became harder to earn money for tuition. It may also be the belated effect of a 2006 policy change that made student loans available to more upper middle-class families.

A quick change bought the federal program some time, but it must soon decide whether to lift the cap further on the amount of money it can legally lend students or cut back on the number of student loans it offers. What's more, the expansion of debt-financed education is raising fresh questions about the possible impact on future graduates of a run-up in interest rates.

The government-issued loan program's costs to taxpayers include provisions for interest relief for unemployed graduates and a default rate of more than one dollar in eight. According to a 2008 actuarial report, the program's net cost to government was $697-million in 2006-07 and rising by 2.3 per cent a year.

Under the rules of the Canada Student Loans Program, the total of outstanding loans is capped at $15-billion. The 2008 actuarial report projected that total loans would reach that level in 2014 or 2015. Then a recent review discovered that threshold would be crossed this month. Through an order-in-council dated Aug. 20 and made public last week, the Harper government rewrote the regulation that defines how the total loan amount is calculated, shaving off more than $1.9-billion.

The loan program is overseen by Human Resources and Skills Development Canada, which blames the recession for the surprise jump in loans, noting that the last academic year saw a jump of about 10 per cent in the number applications. Staff for minister Diane Finley would not say exactly how the government plans to respond over the long term to the jump in outstanding loans.

"As a result of the programs that our government has introduced, more students now have access and the flexibility they need to government programs so they can attend postsecondary education," her spokesman Ryan Sparrow said in a prepared statement to The Globe.

During the recession, part-time jobs for students dried up, parents had less money to contribute to their children's education and those graduating faced less-than-rosy employment prospects.

"People are graduating more than ever before with mortgage-sized debts," said David Molenhuis, chairman of the Canadian Federation of Students, a national advocacy group. "The kinds of jobs that are out there aren't the kind of dream jobs that allow you to make large payments on your loans."

Average tuition fees, meanwhile, have risen faster than inflation while federal subsidies for postsecondary institutions has slipped.

"Tuition and fees have been going up quite rapidly and that would have a net impact on how much people would qualify for," said Hugh MacKenzie, an independent consultant on economics and education finance and research associate with the Canadian Centre for Policy Alternatives.

The Canadian Alliance for Student Associations estimates that, adjusted for inflation, Ottawa transferred $3-billion less to the provinces for postsecondary education in 2007 than it did in 1995.

Ottawa may also have encouraged a spike in student borrowing by making student loans more widely available, said Alex Usher, president of the Toronto-based consultancy firm Higher Education Strategy Associates.

In 2006, loan rules were changed to allow children with more affluent parents to qualify for the program.

At first, few people took advantage, he said, perhaps because wealthier families didn't need to borrow the money. Mr. Usher suspects that once the recession started, more students from wealthier families began signing up for student loans.

With interest rates expected to rise in coming years, the $15-billion in outstanding student debt will become much more expensive for students to service, and for Ottawa to administer, Mr. Usher said.